Relations with Turkey remain the ultimate test of Greece's ability to chart a foreign policy that best serves its interests rather than simply inflames old passions over the two countries' disputes in the Aegean Sea and on the island of Cyprus. Their long-standing hostility, marked by mutual suspicion and distrust, is of more than parochial concern given the strategic importance of the region, lying at the crossroads of the Middle East, Central Asia, and Europe. Compared with Greece's past regional controversies, its disputes with Turkey are more vast and complicated-political problems in essence, but political problems underscored and overwhelmed by historical bad blood, incessant second-guessing of motives, and high-pitched rhetoric that plays well in each side's press. These two countries, for all their past intermingling and cross-cultural ties, are simply different animals, psychologically and politically.

In time, the prospects for improving relations may grow because of positive developments on the Greek side. A change of government, a new awareness of the benefits of European integration, and improved relations with Balkan neighbors all contribute to a more constructive Greek attitude.

Since the election of Kostas Simitis as prime minister in January 1996, the somewhat aggressive image and tenor of contemporary Greek politics, embodied by the late prime minister, Andreas Papandreou, have changed, and with them many obstructive aspects of the country's domestic and foreign policy. Simitis, not without criticism or controversy, has tried to rid Greek politics of the charismatic, sometimes brazen type of leadership that saw domestic and foreign policy veer precariously between populist sentiment and long-term strategic interests. At last Greece may have grown into political maturity, which would serve its goal of gaining a more secure foothold in Europe.

For the first time Greece understands that it is part of Europe and that its political and economic success is wholly dependent on the extent to which it chooses to cultivate its relationship with the European Union. This realization has alleviated Greece's pronounced insecurity over its dual European and Balkan identity, which bred a defensive, sometimes antagonistic attitude toward its regional neighbors and an "illegitimate child" status within the EU. The two pillars of the European orientation are Greece's commitment to the Maastricht Treaty's standards for economic convergence and its attempts to foster better regional ties.

Such new thinking has appeared on several fronts. Greece's two main political parties, Simitis' Panhellenic Socialist Movement and New Democracy, representing, respectively, the mainstream left and right of Greek politics, have generally aligned their domestic and foreign policy platforms. Opposition to Simitis is confined to a small parliamentary bloc of Papandreou die-hards and has consisted mainly of criticism of current economic austerity measures and the prime minister's more liberal outlook toward Turkey. The appointment of younger, multilingual cabinet members such as Foreign Minister Theodoros Pangalos also reflects the European push of the Simitis government. Pangalos represents an internationally minded new view of Turkey, even in the midst of the two countries' deteriorating relations. "We Greeks," Pangalos said early last year, "must get over the old knee-jerk reaction that if something is bad for Turkey, it is good for us."

Long the recklessly manipulated tool of the country's politicians, the Greek economy has improved greatly. A new austerity program to bring it within Maastricht guidelines has lowered inflation in two years from 12 percent to 6 percent, while the growth rate has held steady at about 3 percent. Government interventionism has not been abandoned, but there is broad awareness that a free-market economy must replace the combined legacy of ubiquitous bureaucratic involvement and an entrenched black market estimated at 30 percent of the economy.

Under Simitis, Greece has improved relations with Albania, Macedonia, and Bulgaria, tempering the reputation it gained during the disintegration of Yugoslavia as the "bully of the Balkans." Just six years ago Greece was a prominent obstructer of Macedonia's emergence as a state. Today it is the largest foreign investor in Macedonia and neighboring Bulgaria. Greece has signed a 20-year "special ties" agreement with Albania and contributed a large force to the U.N.-sponsored humanitarian relief effort in the wake of Albania's economic collapse and civil breakdown early last year. As for Serbia and the Serbian entity in Bosnia, Greece has noticeably cooled the economic and political relationship that developed over the course of the Bosnian war. Greece's newfound detachment represents a lessening of fears that Turkey will resurrect destabilizing balance-of-power designs on the Balkans through ties to Muslim and Turkish populations in the region.

The outstanding obstacle to Greece's more concentrated economic and political attention to Europe remains its differences with Turkey. For example, Greece still spends $3 billion on defense, mostly in the Aegean, the most per capita of any NATO member. At the summer NATO summit in Madrid last year, the two countries indulged in goodwill diplomatic gestures. But subsequent bellicosity, primarily over Cyprus, prompted NATO chief Javier Solana to personally calm tensions between the two countries in early October. The continuing hostility fuels the kind of nationalist zeal Simitis is eager to defuse.

ROUGH WATERS IN THE AEGEAN

In the Aegean Sea, the two countries differ over airspace regulations, island sovereignty, and rights to oil and gas on the continental shelf. Contentiousness over these issues is heightened by international legal rulings that are irritatingly noncommittal and therefore endlessly disputed. Since prospecting in the region came under dispute between the two sides in the early 1970s, it has been perennially referred to the International Court of Justice, which has never leaned strongly to one side or the other. Turkey has consistently avoided such mediation. In 1975 it assembled a non-NATO force, the Fourth Aegean Army, for stationing along the Anatolian coast facing the Greek islands. Then in 1976 it issued oil exploration licenses in a contested region of the eastern Aegean and sent a research vessel, Sismik I, to prospect for oil. When some of the prospecting took place near the Greek islands of Lemnos and Lesbos, Greece protested and requested U.N. intervention. The world body told the two countries to work it out between themselves. And the International Court of Justice rejected Greece's request for mediation, arguing that Turkey's prospecting was not a violation of Greece's territorial rights.

In 1987 Greece announced it would take control of the Canadian North Aegean Petroleum Company, which had exploited the Prinos oil field off the Greek island of Thásos. The company had earlier made plans to prospect outside Greece's territorial waters-an uncontroversial move in Turkey's view as long as the company was under Canadian control. But after the Greek announcement, Turkey issued permits to the state-owned Turkish Petroleum Corporation for oil exploration outside Turkey's territorial waters, again off the islands of Lesbos and Lemnos, and also offshore from Samothrace. Prime Minister Papandreou responded by warning that Greek armed forces would "teach the Turks a hard lesson." Turkey reacted by declaring that any Greek attempt to harass a Turkish research vessel would meet with retaliation. The controversy was defused when Prime Minister Turgut Özal restricted the research to Turkish territorial waters and Papandreou returned the issue to the International Court of Justice. It has languished there ever since.

FOREVER CYPRUS

On Cyprus, the continuing standoff between the Greek and Turkish communities is coming under additional stress from the Greek Cypriot government's efforts to join the EU and its scheduled acquisition of $425 million worth of Russian medium-range surface-to-air missiles. These developments represent a profound shakeup of the island's slumbering 20-year status quo. Cyprus' missile purchase, as well as its recent defense pact with Greece, are signs of a government that is eager to consolidate its military position along with its likely political position within the EU. Whether Cyprus enters as half a country or not, the Greek Cypriot government enters as the only recognized government on the island, and a wealthy one at that. Turkey, as the sponsor and sole recognizer of the Turkish Republic of Northern Cyprus, has said that deployment of the missiles and Greek Cypriot entrance into the EU before Turkey would be grounds for war and further "integration" of the northern sector of the island with Turkey.

Both sides are vying for the attention of the United States, now seen as the main broker on the island. Turkey hopes that a favorable American attitude will reinforce its near-sovereign status on the north end of Cyprus and sway the EU to enlarge Turkey's association beyond its customs union, which Turkey entered in 1996. Greece worries both that the United States will lean toward Turkey's position and that the EU is moving toward implicit acknowledgment of an official status for the Turkish Cypriot government.

Greek Cypriot officials also worry that the U.N. reunification plan drafted in 1993 implicitly recognizes Turkish Cypriot self-rule even while outwardly supporting Greek Cypriot claims to overall sovereignty. The proposal for a "bi-communal, bi-zonal federation" of north and south-allowing for separate flags, separate foreign policies, the presence of Greek or Turkish troops on each side of the island, as well as separate, community-based voting majorities in the proposed legislature - is viewed by Greeks, in the words of the scholar Van Coufoudakis, as the "de jure recognition of a de facto partition."

The other, more unwieldy dimension of the Cyprus issue concerns U.S. strategic objectives in the area, which Greece reads as aligned with Turkey's objective of monitoring activities in the Middle East. Greek officials point to Turkey's purported interest in a fortified base on northern Cyprus or elsewhere in the Mediterranean. And they look askance at Israeli-Turkish cooperation, which includes a military alliance, a joint venture to develop long-range missiles, and Israel's agreement to modernize 54 Turkish f-4 jets. Of further concern are Turkey's demands to participate in a just- announced Israeli-Cypriot-Italian consortium to build an $80 million undersea Mediterranean telecommunications cable, and the construction next to a major Turkish military base of a Mediterranean port at Ceyhan that would link up with an oil pipeline through Turkey from Central Asia and possibly Russia. Ironically, Turkey is wooing Russia at a time when Greece is delaying a project that would pipe Russian oil through Bulgaria to a Greek port.

Despite the differences and irritations, Greek Foreign Minister Pangalos has supported Turkey's candidacy for EU membership, saying last March that "Turkey certainly belongs to Europe." Pangalos' remarks heightened international attention to Greek-Turkish relations and shifted the sensitive issue of Turkey's "Europeanness" to Western Europe, a move intended to relieve Greece of what it has seen as its role as a buffer state against Western Europe's "Eastern" fears and prejudices. The foreign minister's rhetorical gesture also kept alive discussion of Turkey's possible EU membership so that Turkey would not grow resentful and refuse to negotiate with Greece. Pangalos simply announced the obvious: Greece's political and economic interests would be more easily served by a Turkey in the EU than a Turkey outside it. Pangalos was also recognizing Turkey's pivotal position for the United States on the Black Sea, adjacent to Central Asia and the Middle East.

WOOING THE UNITED STATES

Greece has seen its international role as a bridge, but sometimes as a barrier, between East and West and between Europe and the Balkans. Greece does not want to be pigeonholed in that role, and it is fearful that might happen because of the United States' awareness of Turkey's strategic importance. For the future, Greece sees its strongest political prospects to be in the EU and its most reliable security arrangements to be with the United States.

Thus Greece is looking to enhance its ties with the United States, emphasizing its consistent support of U.S. policy and international law and its domestic stability, the latter being notably absent in Turkey. Still, stabilizing, if not resolving, differences with Turkey is a prerequisite if Greece is to achieve its larger foreign policy objectives.

To that end, a nonaggression pact between Greece and Turkey overseen by the United States should be considered. Implicitly, the two countries' NATO membership is understood to be the guarantor of their nonaggression. However, a specific nonaggression pact would relieve NATO of having to reproach one side or the other in the process of mediating between them. In the past, such mediation has elicited words of defiance from both sides.

Thinking regionally, Greece is well equipped to play a significant role in eastern Mediterranean security arrangements, something that NATO has identified as a crucial concern. Greece is currently engaged in a five-year, $8 billion upgrade of its defense forces. Greece already has excellent base facilities, as it demonstrated during the Lebanese civil war when the U.S. base at Hellinikon was used as the primary Middle East evacuation center. Nea Makri in Marathon shelters a Mediterranean communications center, as well as a large fleet of NATO submarines. The Souda Bay air base in Crete is a supply facility for the U.S. Sixth Fleet and has been a center for monitoring Libya.

What's more, despite recent agreements on European security and arms reduction, the potential for open conflict in the eastern Mediterranean is closer to the surface than ever before. First, there is a huge quantity of armaments there that lies outside the 1990 Treaty on Conventional Armed Forces in Europe. And U.S., former Soviet, and European naval armed forces remain outside CFE provisions. Moreover, Israel, Syria, Egypt, Libya, and Algeria all possess ballistic missiles of varying range and accuracy and are seeking to acquire better systems.

As for energy and oil supplies, assurances in the region are even more important and call for a strong Greek naval presence. Supplies coming through the Suez Canal remain a vital concern, as does the potential opening of a pipeline from Iraq to Syria. The eastern Mediterranean and the Persian Gulf form a single entity with Turkey and Egypt providing a continental and maritime bridge between Europe and the Middle East. Of the materiel needed to support coalition operations in the Persian Gulf during Desert Shield and Desert Storm, 90 percent arrived via the Mediterranean.

Development of Greek-Turkish economic relations may be the most important element in the long-term improvement of relations between the two countries. Economic relations have not taken off to the extent one would expect given the markets and relatively cheap goods available on either side. Still, there are signs that such endeavors are about to grow, as evidenced during two meetings of Greek and Turkish businesspeople in November and December hosted, respectively, by U.S. Cyprus envoy Richard Holbrooke and former Undersecretary of State Matthew Nimetz. Most important, the relationship between upper-echelon business elites in Turkey (the powerful Koc and Sabanci groups, which already have some dealings with Greece in the cement trade) and Turkish military leaders is very close. A strong business relationship with Greece would encourage Turkish business leaders to press for better political relations with their neighbor. The consequences would be as swift as they would be positive. For what Greece wants from Turkey above all else is some sign that they can at last do business together.

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Marcia Christoff Kurop is currently at work on a book on Muslim intellectuals. She is a former special correspondent for The Wall Street Journal Europe based in Sofia, Bulgaria, and Thessaloniki, Greece, and U.N. Correspondent for The Christian Science Monitor.